A topological approach to structural change analysis and an application to long-run labor allocation dynamics

Abstract

A great part of economic literature deals with structural changes, i.e. long-run changes in the structure of economic aggregates. While the standard literature relies on the mathematical branches of analysis and algebra for modeling structural change and describing the relevant empirical evidence, we choose a topological approach, which relies on the notions of self-intersection and mutual intersection of trajectories. We discuss all the methodological and mathematical aspects of this approach and show that it is applicable to a wide range of classical topics and papers of growth and development theory. Then, we apply it for studying a specific type of structural change, namely, the long-run labor reallocation across sectors: we (a) elaborate new empirical evidence stating that mutual intersection and non-self-intersection are stylized facts of long-run labor reallocation , (b) suggest and discuss theoretical explanations of non-self-intersection, and (c) discuss mathematical methods for explaining mutual intersection by using standard structural change models. Overall, our approach generates new evidence, new critique points of the previous structural change literature, new theoretical arguments, and a wide range of new research topics.

Models of structural change and Kaldor’s facts: Critical survey from the Cambridge Keynesian perspective

“…Suppose a three-dimensional di¤erential system of equations: x (t) ; y (t) ; and z (t). Then, the GBGP can be exempli…ed by the state at which y grows at a constant rate but not x and z or y and z grow at an identical constant rate but not x (Stijepic, 2011).…”

“…First, as already mentioned, structural change is nothing but the theoretical …eld of research that Pasinetti, one of the most in ‡uential Cambridge Keynesian economists, pioneered in the early 1960s and has extended since (Baranzini and Mirante, 2018). Although some studies such as Rogerson (2019) and Stijepic (2011) review the relationship between structural change and Kaldor's facts from mainstream perspectives, few works are written from the Cambridge Keynesian point of view. 4 Second, Kaldor was one of the most in ‡uential and prominent …gures among Cambridge Keynesian economists.…”